Companies run by billionaires perform twice as well as the rest of the market, according to a new report. Here are some of the reasons why.
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This story originally appeared on Business Insider
Intelligence isn’t what makes billionaires successful, a new report by the investment bank UBS and PricewaterhouseCoopers suggests.
It is billionaires’ “appetite for smart risk-taking, business focus and determination” that help them build and sustain their wealth, according to UBS and PwC’s 2019 Billionaires Report. These personality traits create what UBS and PwC call the “billionaire effect”: Companies run by billionaires perform twice as well as the rest of the market.
According to UBS and PwC, companies run by billionaires enjoyed returns of 17.8 percent from 2003 through 2018. That’s compared with the MSCI AC World Index’s 9.1 percent return during the same time period. Billionaires’ companies were also consistently more profitable and performed better in the six years following an initial public offering than companies controlled by nonbillionaires, according to the study.
The report discussed the trifecta of traits it found added up to their success: They know how to take smart risks; they are obsessively focused on their businesses, which allows them to see opportunities others missed; and they think longer-term than less wealthy CEOs.
At a press event hosted by UBS on October 6, John Matthews, UBS’ head of ultra-high net worth Americas, described a conversation with a client talking about the client’s success.
“His comment to me was, ‘John, I don’t think in quarters, I think in 10 years,'” Matthews recalled. “It’s a different mindset.”
A multitude of studies and books have similarly concluded that billionaires think differently from the majority of the population
The UBS and PwC report underscores findings that align with what other studies and books have also found: Billionaires think and operate differently from the majority of the population.
A review of the personality tests of 43 people with net worths above $11 million by the German researcher Rainer Zitelmann found that ultra-wealthy entrepreneurs tended to have high tolerances for frustration and be more detail-oriented than the general population, Business Insider previously reported.
“To sum this up, you can say that rich people are less neurotic and less agreeable, but have a higher degree of conscientiousness, are more open to new experience and more extroverted than the population as a whole,” Zitelmann said.
The entrepreneur Rafael Badziag, meanwhile, spent five years conducting face-to-face interviews with 21 self-made billionaires and found that the same characteristics that made them successful could also lead to their downfalls.
“Billionaires are nonconformists who demonstrate individualism at an early age when they break more than a few rules,” Badziag wrote in his book, The Billion-Dollar Secret: 20 Principles of Billionaire Wealth and Success.
“Knowing when to make the leap versus when to run in the opposite direction often means the difference between bankruptcy and billions,” Badziag added.